How to work in the UK and / or through UK.
Before making a decision you need to think carefully about which structure suits your particular needs. Wrong decisions at set up point can expose you to unnecessary costs and risks, and failure to address some practical issues can cause problems to your business or partners.
FCI-PlusPoint helps you avoid unpleasant developments by undertaking a thorough planning stage, set up entities, open bank account (s) and set up all required operations for the smooth and beneficial operation of your business in the UK and or globally.
1. SoleTrader (Self-Employed)
The Individual business fits into professions where starting work depends on the individual and does not require large investments, such as carpentry, doctors or freelance services. It does not hinder the employment of staff, but it provides the flexibility to grow as needed.
Business activity between two or more people which is known as a “partnership or cooperative”. Everyone can hold an equal share or some may have a larger share. Each Partner is responsible for the debts of the business according to its stake. The same is true of the percentage of income among the Partners.
Unlike other types of businesses, the cooperative (and sole proprietorships) can start operating immediately, although some businesses may need a commercial license or a license to practice. If the transactions are carried out with a name other than that of the owners, their names and their individual addresses must be displayed. This is the second most popular type of business, most often associated with the profession of accountant, lawyer or doctor. Often, each partner specializes in a particular service or is responsible for a specific area.
You should be aware that, because any decisions and actions depend on the mutual agreement of the partners, there may be conflicts in the long run or even dissolution. That is why it is important before a business start to draw up a “partnership agreement”.
Types of Partnerships
(A) General Partnership:
Two till twenty partners. It also covers the case where two or more individuals or other persons (such as a business and a person) carry out their business as partners, either officially or not.
As far as asset protection is concerned, unregulated companies are worse than individual businesses. Whatever a partner makes affects everyone else, because he is personally responsible for all the obligations arising from the partnership agreements.
(B) Partnership with Restrictions:
This form is very rare today and represents less than 1% of all UK partnerships. Limited Partnership (LP) is an association of one or more joint venture partners together with one or more limited partnerships for “business” for profit as co-owners. The most important feature of an LP is that the limited partnership enjoys limited liability if it is not involved in the control of the partnership. LP’s full-time partners are also responsible for LP’s obligations.
(C) Limited Liability Company (LLP):
It is similar to the standard partnership, except that individual members have reduced debt obligations that may arise from the operation of the firm. In fact, an LLP is similar to the operation of a Limited Liability Company. As a result, LLP is recommended only for lucrative businesses.
An LLP may be formed by two or more individuals (individuals or companies, not necessarily UK residents such as Cypriot or Belize Companies). To form an LLP, partners must file a cooperative document with the Registrar of Companies. The owners and administrators of an LLP are the same. The management structure and the relationship between the partners are a matter of agreement between them and can be recorded in a separate LLP agreement similar to that of the Partnership.
Advantages of LLP
Members do not have any personal liability for LLP debts and contracts either jointly or completely for the negligence of any member.
Members’ liability to contribute to liquidation is limited to the amount they agree to contribute in the event of liquidation as recorded in the LLP agreement.
Financial records are filed with the Registrar of Companies and are accessible to the public.
The money and property received by LLP becomes its property and the contributor is not entitled to their return unless otherwise stated in the Partnership Agreement.
3. Limited Liability Companies (LTD)
A third way of doing business is the limited liability company (with anonymity). The business is registered with the Registrar of Companies and is an entity on its own. Companies are subject to more rules related to their operation, but there may be further tax benefits. The people involved have shares in the business depending on their participation. A public limited liability company is legally considered as a separate entity by its shareholders. For this reason, if the company for any reason is unable to meet its obligations, the shareholders will be personally liable for the outstanding amount of their shares alone. Of course, in cases where shareholders have acted fraudulently or negligently, their personal responsibility can not be limited. Finally, Managers have a personal responsibility that can arise if their company markets them while they are insolvent.
Whilst limitation of liability appears appealing, you should be aware that in some cases, especially in the case of banks or other financial institutions, personal guarantees may be required from directors, and / or shareholders. This then negates that advantage.
The United Kingdom distinguishes between wage earning and self-employment income. Directors are taxed on the basis that they have income from salaried services. All businesses must comply with certain legal requirements. This may include requirements in relation to Health and Safety, Operations – Descriptions of Trade, Data Protection Act, Employment Law, etc.
Limited Liability Company VS Cooperative
Advantages and disadvantages
Should you operate in the form of a limited company or cooperative? Or maybe as a Limited Liability Company (LLP), where some believe it offers the best of both forms? It is important to choose the most appropriate corporate form in relation to other factors such as tax and succession.
Each company must evaluate its ambitions in the light of current circumstances and decide the most appropriate route. Choosing the best and most functional design is the most important part of your business success.
A public limited company is an independent legal entity, managed by its directors and owned by its shareholders, who are often the same people. Each company must publish its annual accounts, although small companies with a turnover below GBP 5.6 million per year need only provide a basic financial summary and no audited accounts are required.
On the contrary, the Cooperative is owned and managed by the partners themselves, who are personally and jointly responsible for the actions of their colleagues based on the Partnership Agreement.
Cooperatives do not need to publish their financial statements or be audited by a authorised auditor.
A link can be used, such as: Limited Liability Companies to create Cooperatives for different types of projects. This provides maximum flexibility and helps the business to protect itself. It can also be a useful way to ensure succession of directors / partners.
As members have limited liability, the protection of LLP people requires the keeping of accounting records, the preparation and submission of annual accounts by a certified auditor and an annual report to the Registrar of Companies in a similar way to the companies. The exceptions (and limits) that apply to companies with the delivery of short financial statements and the exemption from audit by the certified auditor, also apply to LLPs